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Resolving

MEDICAL CLAIMS with Structured

Settlements


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DECEMBER 2013 | Volume 62

December 2013 The Self-Insurer (ISSN 10913815) is published monthly by Self-Insurers’ Publishing Corp. (SIPC), Postmaster: Send address changes to The Self-Insurer P.O. Box 1237 Simpsonville, SC 29681

FEATURES

Editorial Staff

ARTICLES 12

ART Gallery: A Fable of Lemmings and Men

16

PPACA, HIPAA and Federal Health Benefit Mandates: Health Care Reform Update – Treasury and IRS Issue Proposed Rules on Reporting Requirements for Employers and Group Health Plans

PUBLISHING DIRECTOR James A. Kinder MANAGING EDITOR Erica Massey

4

SENIOR EDITOR Gretchen Grote

Resolving Medical Claims with Structured Settlements by Bill Wakelee

CONTRIBUTING EDITOR Mike Ferguson DIRECTOR OF OPERATIONS Justin Miller DIRECTOR OF ADVERTISING Shane Byars Editorial and Advertising Office P.O. 1237, Simpsonville, SC 29681 (888) 394-5688

24

James A. Kinder, CEO/Chairman

On-Site & Near-Site Clinics Offer Value in Benefit Structure for Self-Insured Employers

Erica M. Massey, President

by David Boucher

2013 Self-Insurers’ Publishing Corp. Officers

INDUSTRY LEADERSHIP 32

SIIA President’s Message

Lynne Bolduc, Esq. Secretary

© Self-Insurers’ Publishing Corp. All rights reserved.

The Self-Insurer | December 2013 3


Resolving

MEDICAL CLAIMS with Structured

Settlements by Bill Wakelee

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© Self-Insurers’ Publishing Corp. All rights reserved.


C

atastrophic and high value workers’ compensation claims frequently have two parts that need to be resolved, indemnity benefits and medical benefits. Depending on State statutes, both parts of the claims are often settled at the same time. While the value of indemnity benefits can be debated by attorneys and claims professionals, it is often the medical portion of the claim that present the biggest challenge to the resolution of the workers’ compensation claim. The settlement negotiations and the resolution of large workers’ compensation claims are often difficult due to a host of reasons. The injured employee has a level of anxiety about what the future holds. There is a level of worry over paying future living expenses, the cost of on-going medical care, and the impact of the employee’s injury on their family. Often this anxiety about the future leads the injured employee to hire an attorney. When an injury leaves the employee with a chronic, lifetime medical issue, the employee’s fear of what the future holds often makes it difficult to resolve the medical portion of the workers’ compensation claim. Injured employees often look at the cost of their medical care since their injury and make the erroneous assumption that their future medical care will cost as much per year in the future as the medical care has cost each year since their injury. Employees frequently don’t understand the needed amount of medical care will taper off with time. Injured employees who do not have a financial background often do not understand the reasons for a structured settlement offer, the concept and process of how it works, or the significant advantages it could have for their situation. Frequently, if the

employee is not properly advised by his/her attorney, the employee will say “give me the money, and I will manage it.” However, once an injured employee learns the benefits of a structured settlement, they often opt for this solution to help resolve both their indemnity and medical claims. The injured employee is justifiably fearful of what the future cost of medical care will be. A structured settlement can bridge the gap between the employee’s fear of the unknown future medical cost, and the reality of the medical care cost. To achieve this, a medical cost projection can be completed to establish the estimated cost of future medical care. A structured settlement of the medical cost, with an independent administrator of the payments for medical services, can relieve the injured employee of trying to manage these often substantial and complex costs. Structuring both the indemnity and medical portions of the workers’ compensation claim often work where a lump-sum settlement doesn’t, due to the way a structured settlement pays the injured employee. Instead of the injured employee receiving a lump sum, the employee receives a series of periodic payments over an extended period of time, often for the life of an employee with a catastrophic injury. The structured settlement professional, through the use of highly rated life insurer annuities, designs a payment plan to cover the cost of future medical care. These plans are based on medical cost projections obtained from experts who have reviewed the injured employee’s medical information. The structured settlement professional also often arranges a second annuity, to cover both immediate and future income needs, as well as any other miscellaneous costs and expenses.

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To address the injured employee’s concerns about their future medical care cost, claims professionals and attorneys will turn to companies that specialize in life care planning. In a life care plan, the medical history of the injured employee is reviewed – both the injury medical history and the employees other non-injury medical issues (obesity, diabetes, hypertension, etc.) that could impact the cost of future medical treatment related to the workers’ compensation injury. It is often the case that a substandard age rating, or rated age, will be issued for the claimant based on their reduced life expectancy from all their medical issues, regardless of whether they are claim related or not. This rated age allows the structured settlement broker to recognize significant discounts on the pricing of the annuities used in their settlement designs, giving additional flexibility to the negotiations process. The medical professionals providing the life care plan will review the employee’s medical history to estimate the cost of future medical care including: • Doctor visits • Diagnostic testing • Surgical needs • Therapeutic treatments • Medical supplies • Durable medical equipment (wheelchairs, hospital beds, etc.) • Prosthetic or orthopedic requirements • Medications • Home health care aides or facility based medical care • Handicap modifications of residence • Medical/handicap transportation needs At this point, the structured settlement professional can play an important role in the settlement

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negotiations. They will sit down with the injured employee, and the employee’s attorney, to discuss the future medical and financial needs. It is often the case that a structured settlement design, which addresses both the medical and indemnity portions of the claim, can be created to meet the needs of the injured employee while staying within the adjuster’s settlement range. If the injured employee has already applied for and has started receiving Social Security Disability, or is within 30 months of being Medicare eligible, the life-care plan must be approved by a federal government agency, the Centers for Medicare and Medicaid Services (CMS). The document containing the injured employee’s projected future medical cost/life care plan is known as a Medicare Set-aside Arrangement or Medicare Set-Aside Agreement (MSA). The medical experts working for CMS will review the same medical history as the life care planner. CMS will advise if they concur with the projected future

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medical care cost or if they disagree. If they disagree, the provider of the MSA can review CMS’s objection(s) and make the necessary adjustments to the life care plan and resubmit it for approval. When the injured employee is not on Social Security Disability or will not be eligible for Medicare in the next 30 months, the future cost of medical care is analyzed and a medical cost projection (MCP) is calculated in the same manner as the MSA, but does not have to be submitted to CMS for approval. Frequently the amount of money necessary to pay for the future medical care can be a large sum, a larger sum of money than most people have experience managing. This is where a structured settlement broker can greatly assist the parties. An immediate annuity bought from a highly rated life insurance company guarantees the funding of the medical care, and an independent administrator manages the payments when incurred. Professional administration of the medical benefits protects the employee from the risk of mismanagement of the settlement amount determined by the MSA of MCP. A structured settlement of the medical cost also prevents the unintentional depletion of the medical funds by the injured employee. With a precise estimation of future medical costs, the claims professional or attorney is then ready to negotiate a resolution of the claim with the injured employee or employee’s attorney. A settlement of the medical benefits portion of the claim can then be achieved because outside experts, not the claims professional or the employee’s attorney, have established the future cost of medical care. When a structured settlement concept and process are properly explained to an injured employee, the employee will often choose the financial security and peace of mind that a structured settlement provides. The structured settlement of the medical benefits also benefits the workers’

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compensation insurer. The cost of an annuity that pays out over a long period of time is cheaper than paying a lump sum now for all future medical care, simply due to the time value of money, and due to any rated ages received on the case. For example, let’s say we have a 45 year old male who needs about $10,000.00 in medical care for the next 25 years, a total cost of $200,000.00. The cost of that annuity would be about $165,000.00, representing a savings of $35,000.00. Additional discounts might be available depending upon the negotiations, rated ages, the design of the annuity, whether lifetime payments were needed, and so on. To achieve the best results when negotiating workers compensation

cases, it is best to partner with a structured settlement company that has an in-depth knowledge of the process and the marketplace, in order to properly design a settlement that addresses the medical needs of the employee, while obtaining the best price for the purchaser. While a self-insured employer or an insurer can shop around for a new structured settlement company every time they have a large medical claim to settle, the more logical approach from both a cost and time standpoint is to identify a structured settlement company with whom a strategic partnership can be formed. There are several traits the self-insured employer or insurer should look for in selecting a structured settlement partner.

When choosing a structured settlement partner, the self-insured employer or insurer should look for a company that has offices in all the same states as the employer. While a structured settlement broker in Florida might be willing to fly to California to meet with the injured employee in a catastrophic claim, the same broker cannot afford to do this on a case where the purchase price of the annuity might be only $50,000. Therefore, the structured settlement partner needs a geographical spread that covers all your business locations. The structured settlement company selected for a partnership should also have a proven track record. Significant experience in the structured settlement business, local knowledge of the laws

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and jurisdictions of each State, and efficient internal processes, are critical elements when working with a structured settlement company. This will eliminate many of the obstacles that prevent less experienced brokers from reaching a structured settlement agreement on the complex medical cases. In addition to geographical spread and experience, the structured settlement company needs to have the resources (life insurance companies) to provide the best possible price. A structured settlement company that places all its business with one or two life insurance companies will not be able to consistently provide the best purchase price for the structured settlement. The structured settlement company should have business relationships with all of the life insurance companies who provide structured settlement annuities. This allows the structured settlement company to consistently shop the entire marketplace for the best price on each case. The structured settlement company should have the ability to customize each structured settlement to meet the needs of the injured employee. Often the biggest issue in resolving workers’ compensation claims is the settlement gap between what the self-insured employer or insurer feels the claim is worth, and what the attorney for the injured employee is willing to settle for. Having the ability to customize the settlement to meet the injured employee needs, including life-care plans, while maintaining cost control for the employer or insurer, allows the structured settlement company to facilitate a settlement when the claimant, their attorney, and the employer or insurer are unable to reach an agreement on their own. When partnering with a structured settlement company that has the proper geographical spread, experience, life insurance company partners, ability to customize the structured settlements, and a strong reputation, you can achieve the best results in the settlement of your workers compensation claims. Taking advantage of the structured settlement process early and often in your claims evaluation process, will help insurers and employers settle cases more quickly and more efficiently. It is always more advantageous, where jurisdictionally possible, to consider the settlement of both medical and indemnity benefits at the same time, to maximize the advantages offered through structures. This process can help facilitate better settlements on all types of cases, whether they are relatively small, or catastrophic in nature. n Bill Wakelee, MBA, CSSC, is the Marketing Communications Director for Ringler Associates. He is a 25-plus year veteran of the claims, insurance and structured settlement industries. Bill has co-hosted more than 10 radio shows on the Legal Talk Network, is a frequent speaker at industry functions, and has published several articles on claims and financial topics. He is a faculty member at the Haub School of Business at St. Joseph’s University in Philadelphia, as well an adjunct at Ursinus College. He can be reached at bwakelee@ringlerassociates.com.

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ART GALLERY by Dick Goff

A Fable of Lemmings and Men

Y

ou know the plight of the lemmings, the small Arctic critters that are genetically compelled to commit suicide by jumping off oceanside cliffs. If the fall doesn’t kill them, they swim out to sea until they tire and drown – certainly one of nature’s more extreme solutions to overpopulation. Now apparently a lemminglike compulsion has been detected among larger creatures that walk on two legs and wear pinstriped suits with Gucci loafers. Their habitat is state insurance regulatory offices. While no actual deaths have been traced to members of the homo regulatoris class from this practice, they certainly appear to be working against their own interests, a behavior often associated with professional suicide. Some have put aside their concerns for a robust stateregulated insurance industry by prostrating themselves on the altar of federal domination. That’s the only way I can describe the current trend among state regulators who carelessly damage the interests of their own states’ employers and employee/dependent populations by damning selfinsured benefit programs in favor of Obamacare’s health care exchanges. It’s reasonable to me that

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the logical result of this trend would be final federal assumption of national health care, ending much of state insurance regulation, not to mention many regulators’ jobs. Currently it appears that the only people who remain enthused about Obamacare are the state regulators who are following each other off a cliff of their own making. That free fall takes the form of state legislation that limits employers’ access to reasonable levels of stop-loss insurance, which enables them to limit their loss cost dollar amount while self-insuring their employee groups. California – long famed as the left coast bastion of government interference – recently passed the law that requires minimum $65,000 attachment points for self-insurance programs. You can expect other states to follow suit. They will ignore the facts researched by the University of Chicago that self-insured coverage would cost about 25 percent less per individual than Affordable Care Act (ACA) small-group exchanges. “Damn the truth, full speed ahead,” they say with Admiral Farragut-like bravado. Meanwhile the District of Columbia insurance department has made it known that no captive insurance company offering medical stop-loss coverage is welcome there. The regulator who manages captives in DC said this move is to protect the District’s efforts to encourage people to buy health insurance through the exchange it set up under the ACA by eliminating competition from self-insured plans.

The Montana insurance department has said it will no longer accept license applications from risk retention groups (RRG) seeking to provide medical liability coverage. The captive regulator there said the state has gone down that road before and it hadn’t gone well but, in truth, was not because of good governance but from pure politics. A little-known fact providing context is that Montana a couple of years ago caved under pressure by California to not intervene on behalf of the successful Montana-licensed RRG that was providing medical plan liability insurance to a group of California businesses to the distinct benefit of those businesses and their employees. California hadn’t found a way to stop that program other than through two separate lawsuits and its deeper pockets won the legal battle against it. Sad to say, these developments and others to be expected are probably the beginning of the end for the RRG movement. If states can prevent them from writing medical stop-loss coverage, who’s to say they won’t prevent other liability coverage as well.

But wait, there’s hope A different kind of captive program may provide the defense to this problem for employers who selfinsure their benefit plans. It could be borrowed from the P&C world in the form of a “deductible reimbursement collar” which would reimburse employers for a certain portion of their self-insured retention. Taking California as an example, a

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$30,000 reimbursement collar would bring the effective self-insurance stop-loss attachment point to a more reasonable level of $35,000 instead of the California-mandated $65,000. Such a P&C captive insurance policy would not appear in any benefits plan documents and would be totally invisible to state regulators. Once again: ART to the rescue! n Readers who wish to comment on this column or write their own article may contact Editor Gretchen Grote at ggrote@ sipconline.net. Dick Goff is managing member of The Taft Companies LLC, a captive insurance management firm and Bermuda broker at dick@taftcos.com.

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PPACA, HIPAA and Federal Health Benefit Mandates:

Practical

The Patent Protection and Affordable Care Act (PPACA), the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and other federal health benefit mandates (e.g., the Mental Health Parity Act, the Newborns and Mothers Health Protection Act, and the Women’s Health and Cancer Rights Act) dramatically impact the administration of self-insured health plans. This monthly column provides practical answers to administration questions and current guidance on PPACA, HIPAA and other federal benefit mandates.

Q&A

Health Care Reform Update – Treasury and IRS Issue Proposed Rules on Reporting Requirements for Employers and Group Health Plans

P

roposed rules on two new reporting requirements under the Affordable Care Act (ACA) were published by the Department of Treasury and the Internal Revenue Service (IRS) (collectively, the “Treasury”) on September 9, 2013.1 These requirements, contained in Internal Revenue Code (the “Code”) sections 6055 and 6056 are intended to provide information to the Treasury and to affected individuals in order to help enforce certain ACA requirements. In particular, the section 6055 reporting applies generally to persons who provide minimum essential coverage (MEC) to individuals during the year and is primarily intended to help enforce the individual mandate. The section 6056 requirement applies to “applicable large employers,” meaning those employers who are subject to the ACA pay or play penalties, and is designed as an aid to enforcing those requirements. The section 6056 reporting will also be used for enforcement of the provisions relating to the premium tax credits. There is considerable overlap between the two reporting requirements. Although the Treasury indicated that they were attempting to avoid unnecessary reporting and duplication, the provisions in the proposed regulations will create

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– Related employers are treated as separate employers for this purpose. Thus, for example, if a self-insured group health plan covers employees of related corporations, each separate employer within the controlled group is treated as a separate plan sponsor. However, one member of the controlled group may file returns and provide statements to employees on behalf of all members.

new administrative burdens for plan sponsors (and insurers) and in some cases appear to go beyond the information needed for enforcement purposes. Originally effective starting in 2014, the Treasury previously delayed the effective date until 2015 (along with the delay in the employer penalty provisions). Thus, the first required reports will occur in early 2016, based on information for 2015. This Article discusses the reporting requirements as they relate to group health plans.

The 6055 Reporting Requirement 1. What is the purpose of the 6055 reporting requirement? The main purpose of the 6055 reporting requirement is to provide information regarding MEC, as an aid in enforcing the individual mandate provisions of the ACA. The information required under section 6055 may also assist in enforcing the premium tax credit provisions.

• In the case of a self-insured multiple employer welfare arrangement (MEWA), each participating employer. • In the case of a self-insured multiemployer plan, the association, committee, joint board of trustees or other similar group of representatives of the parties who establish or maintain the plan.

• The employee organization (i.e., union) in the case of a selfinsured plan maintained solely by the employee organization. • In the case of a self-insured governmental group health plan, the governmental employer may enter into a written agreement with another governmental unit to make the required reporting. PRACTICE POINTER: Fully Insured Coverage: For fully insured health coverage, the proposed regulations clarify that only the insurer is responsible for 6055 reporting; the sponsor of the group health plan has no reporting responsibility in this situation. 3. When is the 6055 return required to be filed? The 6055 return is required to be filed with the IRS no later than February 28 if filing non-electronically, March 31 if filing electronically.

2. Who is required to file a 6055 return? PRACTICE POINTER: Supplemental Coverage: The IRS requires 6055 returns to be filed only with respect to minimum essential coverage (MEC). Thus, reporting is not required with respect to excepted benefit coverage, such as specified disease coverage or stand-alone vision or dental coverage. The following entities are responsible for filing the section 6055 return with respect to MEC provided under a group health plan: • The health insurance issuer with respect to fully insured coverage.2 • In the case of a self-insured group health plan, the “plan sponsor.”

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PRACTICE POINTER: Electronic Filing: The IRS requires 6055 returns to be filed electronically unless the aggregate of all returns (W-2’s, 6055 returns) the reporting entity is required to file is less than 250. The related statement that must be provided to individuals identified on the 6055 return must be provided by January 31, so that the statement must be provided to the individual before the return is required to be filed with the IRS. Extensions are available in certain circumstances. 4. What information is required to be provided to the IRS on the 6055 return? The proposed regulations generally follow statutory provisions regarding the information that is required on the 6055 return, but also eliminate some of the items otherwise required under the statute. The following is a summary of the information and how it compares to the statutory requirements.

Name, address and EIN for the person required to make the return

Information Relating to Health Coverage Name, address and TIN (or date of birth if a TIN is not available) of the responsible individual

The statute refers to information for the “primary insured”. The proposed rules adopt the term “responsible individual” to reflect self-insured plans. Thus, for example, the case of a self-insured group health plan, the responsible individual would normally be the employee.

Name and TIN (or date of birth if a TIN is not available) of each individual covered under the plan

The entity required for reporting should make reasonable efforts to obtain the TIN of all persons covered under the plan (e.g., including dependents). However, the preamble indicates that if such reasonable efforts are made, penalties will not be imposed for failure to provide the information. Reasonable efforts include two consecutive annual attempts to obtain the information after the first unsuccessful attempt.

For each covered individual, the months The proposed rules include additional for which, for at least one day, the detail on coverage periods that must individual was enrolled in coverage and be included in the return. entitled to receive benefits

Information Relating to Fully-Insured Employer-Provided Coverage Name, address and EIN of the plan sponsor

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The statement required to be provided to the “responsible party” (generally, the employee) must include the information required to be provided on the 6055 return sent to the IRS and, in addition, a contact phone number for the person required to file the return and, if applicable, the policy number.

The 6056 Reporting Requirement

INFORMATION COMMENTS Information Relating to the Reporting Entity

Whether the coverage is SHOP coverage

5. What information is required to be included in employee statement?

The statute also provides that the 6055 return is required to include the amount of any required employer premium. This requirement is not included in the proposed regulations.

Note – Definition of Employer: The 6056 reporting requirements generally apply to each member of a single controlled group as defined in Code section 414(b), (c), or (m). This is consistent generally with the proposed rules under the employer penalty provisions (which look to the entire controlled group to determine if the employer is an applicable large employer (ALE), but determine penalties separately for each member of the group). In this discussion, the term “employer member” is used to refer to each separate member of a controlled group. 1. What is the purpose of the 6056 reporting requirements? The purpose of the 6056 reporting requirements is to assist Treasury with administration of the pay or play employer penalty rules set forth in Code section 4980H. Treasury also notes that the 6056 reporting requirements are designed to assist Treasury with administration of the premium tax credit under Code section 36B. In order to do this, certain information must be reported both to the IRS AND to the full-time employees. 2. Who is required to file a 6056 return? Each employer member is required to satisfy the section 6056 reporting requirements; however,

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employer members may contract with third parties to assist with the filing requirements. For example, the plan sponsor of a plan may report the information required by section 6056 to the IRS on behalf of each participating employer member who participates in the plan; however, the employer member must sign the form and the employer member remains liable for penalties arising from the third party’s failure to accurately and timely file – i.e., the employer member is not absolved of its obligation simply because a third party has agreed to prepare and file the form. PRACTICE POINTER: Multiemployer Plans: The multiemployer plan administrator may file a 6056 return for the contributing employer member with respect to the employer member’s full-time employees eligible for the plan but the employer member must sign the form. The employer member would file a separate 6056 return for all other full-time employees.

4. What information is required to be provided to the IRS on the 6056 return? The proposed regulations modify the list of information otherwise required by 6056 – eliminating some of the information otherwise required by the statute but also adding to it. The following is a summary of the information generally required by the proposed regulations – separated into two categories: information generally derived from the statutory requirements and new information not specifically prescribed by 6056. A. Information From Statute

INFORMATION 1. Name, address and EIN of ALE employer member Name and telephone number of contact person Calendar year being reported Certification as to whether the employer member offered to its full-time employees (and their dependents) the opportunity to enroll in an eligible employer sponsored plan by calendar month

Presumably, this appears to apply at the employer member level. If so, it is unclear whether certification can be made if coverage is not offered to ALL full-time employees each month. If yes, then the number of full-time employees each month (see below) would arguably not be required.

The number of full-time employees of the employer member each month

This will enable the IRS to determine which “ bucket” of excise tax penalty the employer member may be in (if at all) – “sledgehammer” or “tackhammer”. An employer member is in sledgehammer bucket if it fails to offer MEC to at least 95% of its fulltime employees during the month. It is in the tackhammer bucket if it fails to offer coverage to 100% of its full-time employees but offers to at least 95% OR the coverage is not affordable and/ or doesn’t provide minimum value.

3. When is the 6056 return required to be filed? A return is required to be filed with the IRS by no later than February 28 if filing non-electronically – March 31 if filing electronically. PRACTICE POINTER: Electronic Filing: The IRS requires 6056 returns to be filed electronically unless the aggregate of all returns (W-2’s, 6056 returns) the employer member is required to file is less than 250. The statement required to be provided to the full-time employee must be furnished by January 31. Extensions are available in certain situations.

COMMENTS

For each full-time employee, the name, For penalty/premium tax credit address and TIN and the number of purposes, this information is relevant months actually covered under the plan ONLY to the extent the coverage offered isn’t affordable or doesn’t provide minimum value. Keep in mind, coverage could be affordable under the employer penalty provisions but not necessarily under the premium tax credit provisions. However, the information is relevant for purposes of the individual mandate and will be provided on the 6055 return. For each full-time employee, the employee’s share of the lowest cost monthly premium for self only coverage that also provides minimum value.

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B. New Information The following additional information is expected to be requested using indicator codes:

INFORMATION

COMMENTS

1. Whether coverage offered to fulltime employee provides minimum value 2. Whether the employee had the opportunity to enroll the spouse 3. Whether the employee’s effective date of coverage was affected by a waiting period

If the employer member cannot indicate that coverage was offered to a full-time employee during a month, an excise tax could apply unless the employer member can show that the employee was in an otherwise applicable permissive waiting period.

4. Total number of employees for each calendar month

Unclear what purpose this information serves. The penalty buckets described above are determined by reference to the percentage of full-time employees who are offered coverage – not the percentage of employees.

5. If employer member was conducting business during a month 6. If the employer member expects that it will be an ALE in the subsequent year 7. For each full-time employee, the level of coverage offered or, if not offered, the reason it wasn’t offered. For example, an employer member would report the following through a code: (i) if coverage was offered, the level of coverage--employee only, employee and employee’s dependent’s only, employee and employee spouse only, or family; (ii) that coverage was NOT offered during a month but (a) the employee was in a waiting period; (b) the employee was not full-time that month; (c) the employee was not employed that month; or (d) no other exception applies; (iii) coverage was offered but the employee was not fulltime; and (iv) the employer met one of the affordability safe harbors.

These specific codes are design to fill gaps in the general reporting requirements identified in A above; however, the reporting required here is meticulous. Consider for a moment the reporting required for the following employee: Bob is hired on March 15, 2015. Bob is hired as a production line worker and is expected to work 25 hours per week each month. He is offered coverage after a 60 day waiting period. Bob actually averages 30 hours of service per week during 3 of the months that Bob is employed. NOTE: reporting for Bob may be less complicated if the employer member uses a safe harbor method for identifying full-time employees.

5. What information is required to be included on the employee statement? Generally speaking a form must be furnished to the employee that identifies the following information: Name address and TIN of employer member Information included in the 6056 return filed with the IRS with respect to that

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full-time employee. Presumably, this includes the following from #4 above: A.6 (number of months covered) A.7 (employee’s share of premiums) B.1 (whether coverage provides minimum value) B.2 (whether spouse may be enrolled) B.3 (waiting period information) B.7 (reason coverage not offered) PRACTICE POINTER: Clarification Needed: Clarification is needed regarding the exact elements from the 6056 return filed with the IRS that must be furnished to full-time employees. The above information appears to be the only information that would be relevant to the employee for his /her tax return, which is the sole reason information is provided to the full-time employee. Nevertheless, IRS may have a different view. 6. How is the 6056 information reported? As noted above, the 6056 return will be filed electronically unless the employer member qualifies for a small filer exemption, which is based on the number of all returns – not just the 6056. It appears that the 6056 information will be reported on a yet to be developed form – 1094 and 1095. Employer members will file an employee statement on 1095-C as well as a transmittal form, 1094-C, for all returns. Generally, the employee statement furnished to the employee must be mailed; however, it can be provided electronically provided the following requirements are satisfied: • Employee must affirmatively consent to receive the statement electronically. The consent must be electronic or on paper if confirmed electronically. • Certain requirements regarding withdrawal of consent must be satisfied. • Notice of a material change in software must be provided. n

© Self-Insurers’ Publishing Corp. All rights reserved.


Attorneys John R. Hickman, Ashley Gillihan, Johann Lee, and Carolyn Smith provide the answers in this column. Mr. Hickman is partner in charge of the Health Benefits Practice with Alston & Bird, LLP, an Atlanta, New York, Los Angeles, Charlotte and Washington, D.C. law firm. Ashley Gillihan, Carolyn Smith and Johann Lee are members of the Health Benefits Practice. Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner’s situation. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of your situation. Readers are encouraged to send questions by email to Mr. Hickman at john.hickman@ alston.com.

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78 Fed Reg 54986 (Sept. 9, 2013)(reporting of minimum essential coverage under Code section 6055), and 78 Fed Reg 54996 (Sept. 9, 2013) (reporting by applicable large employers under Code section 6056). 1

Phone 301.963.0762 ext. 163

ACCREDITED

www.hhcgroup.com

In a departure from the statute, insurers are not required to report information on individual coverage purchased through an Exchange under the proposed rules, because Exchanges are required to provide information with respect to such coverage. Insurers also are not responsible for reporting information with respect to coverage provided under Medicare or Medicaid or similar governmental entities; rather, the relevant governmental agency is responsible for reporting.

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On-Site & Near-Site Clinics

Offer VALUE in Benefit Structure for Self-Insured Employers by David Boucher

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© Self-Insurers’ Publishing Corp. All rights reserved.


S

elf-insured employers are innovating to find new ways to reduce health spending and find better care for their employees

There are many different interpretations of an “on-site” or a “near-site” clinic in today’s marketplace, much as the word “wellness” is taken on many different tangents. For the purpose of this article, the on-site clinic is referred to generically as encompassing both on-site and near-site (though we recognize there are differences

and members. The concept of an on-site

as implemented). There are various property ownership and lease structures

clinic has been around for years, dating

and variations in who precisely can be treated at the clinic (employees-only or

back to the “company doctor” concept.

employees plus dependents).

The near-site model is similar enough,

Plan design is a key issue to address for an on-site clinic. The clinic itself

where a company essentially has a

represents a unique type of network and should have benefit design ($0 co-pays for

dedicated medical office (shared or not),

instance) to encourage use. The network may choose to have higher co-pays and

yet not specifically located within the

deductibles for not using the clinic when it is open, as a deterrent.

company facility. An on-site clinic or near-site clinic is

Some clinics have a greater orientation toward workers compensation and occupational medicine. The greater savings lie in the medical benefit side, but

a form of a wholesale purchase. Instead

routine occupational medicine has a place in many on-site options. Occupational

of members going out and finding

medicine here includes pre-employment drug screening, on-the-job random screens,

their own medical care on a case-by-

Department of Transportation (DOT) and fit-for-duty physical exams, specialized

case basis, the employer contracts

equipment tests and evaluations, and so on. These tend to be preventive in nature

for an office where their members

and do not involve the complexities of workers compensation cases.

can be seen. The employer assumes

The idea of an on-site clinic has reached maturity with numerous commercial

the burden of making the clinic busy,

players in the space. The variations run the gamut across privately owned, hospital

in exchange for savings on primary

affiliated, pharmacy chain owned, urgent care owned, and others. Each brings a

care-related visits, downstream referral

different variation to the model that is unique to their vantage point.

costs outside its control, increased

Savings for implementing an on-site model are also varied. The base savings

presenteeism, improved employer

model is the cost of a retail visit (average E&M charges for an office visit) versus the

morale, and other negotiated options.

average on-site clinic visit. The clinic “breaks even” at the point where the cost of

What is an on-site clinic? Typically

the individual costs exceed the wholesale cost. Everything above that is savings to

one or more medical providers in

the employer. Primary care and related services may be roughly 5% of medical plan

a primary care-oriented medical

spending, so the number of members in the plan in a local vicinity needs to be 500

office type space serving patients

or more for this concept to really work well.

on a walk-in and appointment basis.

Pharmacy is a key on-site feature, with many plans reporting pharmacy at 15%

Some clinics are a single provider, or

or more of total medical plan spending. The on-site clinic should seek to tackle

a nurse with a telemedicine program.

two concerns in parallel; utilization and formulary. Utilization refers to how often

Still others are full-featured doctors’

and when drugs are proscribed; a benefit plan may have drug X for instance as the

offices with regular staff and support.

preferred medication, when sometimes dietary and lifestyle coaching is required

On-site employee clinics work well

before a prescription. This tends to get into clinical issues outside the scope of this

with self-insured programs, where the

article and the expertise of the author, however common sense may go farther in

employer can set the terms as needed

an employer-run clinic than in a “retail” type visit where the employee is selecting

and has flexibility to determine how to

the provider. Formulary refers to the drugs kept on-site at the clinic for dispensing

create steerage. Sometimes a company

to patients. The employer, through the clinic’s medical staff, is able to acquire drugs

providing on-site medical services

at wholesale pricing and dispense as written in the office. Drug safety checks and

is retained to staff and operate the

even pharmacy benefits adjudication can still be performed, but the savings is

clinic (including medical malpractice

captured by the employer.

coverage), while the rest of the costs

The steerage or referral pattern for diagnostics and specialty visits are also

(real estate, commercial insurance,

critical to cost savings, with can be another 10-20% of medical plan spending. It

promotions, etc.) are left to the

may be the desire of the self-insured employer to have their on-site clinic steer

employer to manage.

patients to pre-selected providers for imaging, orthopedics, physical therapy, internal

© Self-Insurers’ Publishing Corp. All rights reserved.

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© Self-Insurers’ Publishing Corp. All rights reserved.


medicine, surgery centers, and so on.

hours, versus roughly 30 minutes for the

An educated employer can select the

on-site clinic; morale and other benefits

cost-effective providers in a network to

are also not quantified. Data analysis

which their on-site provider may refer.

that self-insured employers should

Wellness and lifestyle management

viii. Recover productivity and convenience for on-the-clock employees;

have ready access to and/or share with

programs can be effectively

outside parties can help to develop

administered from a single on-site

baseline costs and actual savings.

location versus having to coordinate

Benefits to the Employer with the on-site clinic include:

across multiple providers. For

vii. Conducted on-site chronic disease management and referral control;

ix. The employer can determine which groups of employees, retirees, and members are eligible. Benefits to the Employee (and Members) include:

instance, if a member may benefit

i. Savings on primary care $ per visit;

from nutrition and exercise coaching

ii. Savings on pharmacy $ per prescription;

i. Out of pocket savings with no office co-pay (if elected);

iii. Demonstrated high value benefit to employees as a recruiting and retention selling point;

ii. Save with reduced or no co-pay on pharmacy, including direct bill to the employer (if elected);

iv. Ability to better control health care utilization (MRI’s, drugs, labs, etc.) by directly controlling care delivery;

iii. Improved health and quality of life through preventive and immediate care;

v. Reduced absenteeism and increased “presenteeism”;

iv. Visits to the provider can develop into an open and consultative relationship;

program at the company gym, they can be referred directly into the program that is part of the employer’s benefit plan. It is not uncommon for unaffiliated providers to be knowledgeable of or have incentive to refer to such programs. Productivity savings of time-outof-office are an additional savings opportunity area. Based upon industry metrics for instance, the medical office visit for an employee would be 2.5

vi. Coordinated occupational medicine and workers compensation savings, if elected;

v. Increased loyalty and/or sense of morale at the work place;

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vi. Gained time and convenience for the employee and/or their families. Communications to employees, members, and constituents is critical. A “marketing kit” type approach has been used successfully by some on-site operators. The intent is to conduct a marketing campaign to educate all members as to the benefits, sell the services and new features, and drive adoption. The sooner the clinic meets or exceeds the break-even point, the sooner the clinic is creating value to the employer – and providing convenience to their employees. Administratively, all visits or procedures can be coded and submitted to the employer’s TPA as $0 claims for case management and record keeping purposes. Since the employer is self-insured on the health plan this can be modeled as direct savings from historical utilization. An executive at the employer should be nominated as the “owner” and sponsor of the on-site clinic, and will conduct monthly reviews of clinic operations and address employee feedback. A layer of separation between patients’ privacy and employee access should be carefully and clearly established. Access to medical charts should be restricted to clinic personnel at all times. A major opportunity is created where the on-site clinic can affiliate to an urgent care center since the urgent care center might offer a continuum of care for afterhours, weekends, and holidays. Sharing providers between the on-site and urgent care facility, technology, referral networks, and patient support are enhanced. This model also gives the on-site clinic staff the ability to send patients needing more care to the urgent care facility where the patient can be seen quickly and costefficiently; versus going to a hospital outpatient clinic or waiting sometimes weeks for an appointment. Trauma cases, x-ray’s, specialized tests such as audiometry, and other situations require more capabilities than an on-site would typically have, but are perfect for an urgent care center. A second major benefit is the patient coverage schedule. An on-site clinic 8am-5pm Monday-Friday can be augmented by an urgent care with coverage 8am-8pm Monday-Friday and 9am-5pm Saturday-Sunday. If the on-site and urgent care centers are on the same electronic medical record system, the chart is shared and the patient can have a consistent experience.

Since October, 2012, David Boucher has served as President and Chief Operating Officer of UCI Medical Affiliates, Inc. UCI Medical provides management services to 53 urgent care and employer on-site centers under the Doctors Care brand and 21 Progressive Physical Therapy rehabilitation centers in South Carolina and Tennessee, as well as the Doctors Wellness Center in Columbia, SC. Beginning in 2008, David Boucher served as President and Chief Operating Officer of Companion Global Healthcare, Inc. Over the past 7 years, David has been able to examine firsthand the best practices in hospital care in over 25 countries. Both Companion Global and UCI are wholly-owned subsidiary companies of BlueCross BlueShield of South Carolina.

The urgent care visit is likely to be an in-network E&M office charge, with the patient being referred back to the on-site during regular hours. The employer saves money and leverages its on-site clinic, while providing a cost-effective backup solution for more acute needs. In summary, for certain self-insured employers an on-site clinic is a clear path to savings. It must be carefully managed and the data should be constantly checked to ensure it is progressing on track. A capable on-site vendor can accomplish many of the objectives, but the ultimate cost savings responsibility falls to the employer to fully capture. For many employers the on-site is a high quality medical benefit they are able to offer to their employees and dependents, while saving money and creating value for the organization. n

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© Self-Insurers’ Publishing Corp. All rights reserved.


Mind over risk. Staying confident in a world where change is constant.

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UpcomingEVENTS Self-Insured Health Plan Executive Forum March 24-26, 2014 • Charleston, SC The Self-Insured Health Plan Executive Forum (formerly known as the TPA/MGU Excess Insurer Executive Forum) will be held March 24-26, 2014 in Charleston, SC. The educational focus for this event will be to address the interests of plan sponsors, in addition to third party administrators and stop-loss entities.

28th Annual Legislative/Regulatory Conference April 23-24, 2014 • Washington, DC SIIA’s Annual Legislative and Regulatory Conference is your opportunity to hear directly from the policy-makers who will shape the health policy agenda in 2014 and beyond. Experience the political process first hand by participating in SIIA’s popular “Walk on Capitol Hill.” Meet with your federal legislators in their Capitol Hill offices and let your voice be heard. SIIA staff will set up your appointments, provide you with “talking points” and lobbying materials in advance of your meetings.

Self-Insured Workers’ Comp Executive Forum May 20-21, 2014 • Miami, FL SIIA’s Annual Self-Insured Workers’ Compensation Executive Forum is the country’s premier association sponsored conference dedicated exclusively to self-insured Workers’ Compensation funds. In addition to a strong educational program focusing on such topics as excess insurance and risk management strategies, this event will offer tremendous networking opportunities that are specifically designed to help you strengthen your business relationships within the self-insured/alternative risk transfer industry.

International Conference June 9-11, 2014 • Miami, FL SIIA’s International Conference provides a unique opportunity for attendees to learn how companies are utilizing self-insurance/alternative risk transfer strategies on a global basis. The conference will also highlight self-insurance/ ART business opportunities in key international markets. Participation is expected from countries all over the world.

34th Annual National Educational Conference & Expo October 5-8, 2014 • Phoenix, AZ SIIA’s National Educational Conference & Expo is the world’s largest event dedicated exclusively to the self-insurance/alternative risk transfer industry. Registrants will enjoy a cutting-edge educational program combined with unique networking opportunities, and a world-class tradeshow of industry product and service providers guaranteed to provide exceptional value in four fastpaced, activity-packed days.

© Self-Insurers’ Publishing Corp. All rights reserved.

Do you aspire to be a published author? Do you have any stories or opinions on the self-insurance and alternative risk transfer industry that you would like to share with your peers?

We would like to invite you to share your insight and submit an article to The Self-Insurer! SIIA’s official magazine is distributed in a digital and print format to reach over 10,000 readers around the world. The SelfInsurer has been delivering information to the selfinsurance/alternative risk transfer community since 1984 to self-funded employers, TPAs, MGUs, reinsurers, stop-loss carriers, PBMs and other service providers.

Articles or guideline inquiries can be submitted to Editor Gretchen Grote at ggrote@sipconline.net.

The Self-Insurer also has advertising opportunities available.

Please contact Shane Byars at sbyars@sipconline.net for advertising information.

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December 2013

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SIIA PRESIDENT’S MESSAGE Les Boughner

Looking Forward to 2014...

A

nother year of successful SIIA events has gone by and my time as SIIA President now comes to an end. I am excited to see what 2014 brings to our industry, and look forward to serving you as the Chairman of the Board.

The Board of Directors approved several title modifications that do not change the governance of SIIA but more clearly reflect the roles of your Directors and Officers. With Mike Ferguson becoming President and CEO, Don Drelich becomes Chair-Elect. Our Director responsible for financial oversight, Steve Link continues in that role but his title will be Secretary/Treasurer. Johns Jones and Ernie Clevenger will be replaced on the Board by Jerry Castelloe and Bob Clemente. I want to thank John and Ernie for their wisdom and insight and welcome Jerry and Bob. SIIA is fortunate to have the quality, commitment and experience these professionals on its Board. I would like thank all of the volunteers that have served on SIIA’s Committees for all of their hard work and dedication, especially the Committee Chairs: Andrew Cavenagh, Chairman, Alternative Risk Transfer Committee Horace Garfield, Chairman, Government Relations Committee Elizabeth Midtlien, Chairwoman, Health Care Committee Greg Arms, Chairman, International Committee Duke Niedringhaus, Chairman, Workers’ Compensation Committee You have been essential in the success of all SIIA events and your commitment and hard work is appreciated! n

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WE CAN HELP YOU LOWER YOUR COSTS, EVEN FOR YOUR MOST COMPLEX CLAIMS.

Thankfully, catastrophic and complex claims don’t happen often. But when they do, they can result in significant losses for your business and significant injury to your valued employees. A compassionate claim professional with the right resources and experience can make all the difference in bringing about a positive outcome for you and your injured worker. To learn more, ask your broker or visit helmsmantpa.com. © Self-Insurers’ Publishing Corp. All rights reserved.

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SIIA would like to recognize our leadership and welcome new members Full SIIA Committee listings can be found at www.siia.org

2013 Board of Directors

Committee Chairs

CHAIRMAN OF THE BOARD* John T. Jones, Partner Moulton Bellingham PC Billings, MT

CHAIRMAN, ALTERNATIVE RISK TRANSFER COMMITTEE Andrew Cavenagh President Pareto Captive Services, LLC Conshohocken, PA

PRESIDENT* Les Boughner Executive VP & Managing Director Willis North American Captive + Consulting Practice Burlington, VT VICE PRESIDENT OPERATIONS* Donald K. Drelich, Chairman & CEO D.W. Van Dyke & Co. Wilton, CT VICE PRESIDENT FINANCE/CHIEF FINANCIAL OFFICER/CORPORATE SECRETARY* Steven J. Link Executive Vice President Midwest Employers Casualty Company Chesterfield, MO

Directors Ernie A. Clevenger, President CareHere, LLC Brentwood, TN Ronald K. Dewsnup President & General Manager Allegiance Benefit Plan Management, Inc. Missoula, MT Elizabeth D. Mariner Executive Vice President Re-Solutions, LLC Wellington, FL Jay Ritchie Senior Vice President HCC Life Insurance Company Kennesaw, GA

34 December December 2013 The Self-Insurer 2013 | The| Self-Insurer

CHAIRMAN, GOVERNMENT RELATIONS COMMITTEE Horace Garfield Vice President Transamerica Employee Benefits Louisville, KY CHAIRWOMAN, HEALTH CARE COMMITTEE Elizabeth Midtlien Senior Vice President, Sales StarLine USA, LLC Minneapolis, MN CHAIRMAN, INTERNATIONAL COMMITTEE Greg Arms New York, NY CHAIRMAN, WORKERS’ COMPENSATION COMMITTEE Duke Niedringhaus Vice President J.W. Terrill, Inc. St Louis, MO

SIIA New Members Regular Members Company Name/ Voting Representative Loren Brockhouse, Vice President of Sales, Businessolver, West Des Moines, IA Cori Cook, CMC Consulting, LLC, Billings, MT Lina Chan, Managing Partner, CP Risk Solutions, LLC, New York, NY Ray Marra, Vice President, Guardian Life Insurance Company of America, Bethlehem, PA Pat Palmer, Founder, MBAA, Salem, VA Robert Morhauser, National Sales VP, Group Markets, National Guardian Life Insurance Co., Madison, WI John Baker, Vice President Managed Care, Orchard Pharmaceutical Services, Inc., North Canton, OH Steve Rawlins, Chairman/CEO, Rawlins Capital, Franklin, TN Arleigh Kennedy, Vice President Stop Loss and Special Risk, Sutton Special Risk America, New York, NY Michael Comer, CEO, Founder, Wound Care Advantage, Sierra Madre, CA

Employer Members Matt Flett, Assistant Director of Insurance, Associated School Boards of South Dakota, Pierre, SD Nickolas Mehdikhan, VP, Compensation & Benefits Manager, STAR Financial Bank, Fort Wayne, IN

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MTG-2492 (3/13) December 2013 35


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